FX.co ★ EUR / USD: euro remains positive, while dollar prepares for harsh winter

The US dollar starts the week on a minor note, continuing to slide down, close to the important support near 92 points.

The pressure on the protective greenback is coming from positive news about the COVID-19 vaccine, which allays fears of economic restrictions to curb the spread of the virus.

Moncef Slaoui, the chief scientific adviser for Operation Warp Speed, said on Sunday that the FDA may approve Pfizer's vaccine candidate drug in mid-December, and the country's first vaccination will begin the day after that.

On Monday, it was announced that the COVID-19 vaccine, developed by AstraZeneca in partnership with Oxford University, is 90% effective when patients are first given half the vaccine dose and then the full dose. In addition, it is reported that the drug can be stored without special refrigeration equipment.

Against this background, the USD index dipped to its lowest values since the beginning of September - around 92 points.

A vaccine that provides adequate protection against infection is expected to fuel the global recovery and boost stocks and other risky assets. This outlook undermines the dollar, which tends to win in times of heightened uncertainty.

However, market participants can either overestimate the speed of vaccine availability or underestimate some of the risks associated with it, said Tim Courtney of Exencial Wealth Advisors.

"Even if an effective vaccine appears in the near future, there may be problems with its production and distribution. In addition, a sharp deterioration in the epidemiological situation in the world creates the risks of introducing new lockdowns that will strike the global economy even before the widespread introduction of the COVID-19 vaccine. I doubt that any of these risks are included in the quotes. In my opinion, the market is pricing in a too calm float in the coming months," Courtney said.

Brian Jacobsen of Wells Fargo Asset Management has a similar opinion. According to him, "The news about vaccines is very enthusiastic, and it is quite logical - the sooner we get an effective vaccine against coronavirus, the sooner we will return to normal life. However, the main problem is that first, we have to get through the winter, which can meet us with unpleasant economic surprises."

"Winter is going to be gloomy. According to our estimates, the US economy will contract by 1% in the first quarter of 2021. Substantial growth will follow in Q3-4, amid the success of the new vaccine and the expected response to the epidemic," strategists at JP Morgan said.

Additional pressure on the greenback is exerted by the prospect of maintaining a long period of soft monetary policy on the part of the Federal Reserve System.

"Low real profitability in the United States echoes the weakening of the US currency after the pandemic. Therefore, we believe that the downward trend in USD will continue in 2021," said BNY Mellon strategist John Velis.

Amid market optimism at the start of the week, driven by news related to the COVID-19 vaccine, EUR / USD hit two-week highs around 1.1905.

The euro needs to break the November high at $1.1919 to continue the upward trend.

Danske Bank believes that the main currency pair will trade at high levels in the coming months, but in the longer term, the US will surpass the eurozone.

"According to our estimates, in a three-month perspective, the EUR/USD pair could trade in the 1.2000 region, thanks to a combination of factors such as positive news regarding Brexit, an improvement in the situation around the coronavirus and a revival of the global economy," the bank experts said.

"However, on the horizon of six to twelve months, the pressure on the euro will begin to intensify, including due to the extinction of the credit cycle in China, which supported the national economic recovery and caused export demand from Asia. As a result, in twelve months the euro may weaken to $ 1,1600," they added.